InvestorQ : What happens if I do not treat my trading like a business? Can it work against me?
Shreya Mashelkar made post

What happens if I do not treat my trading like a business? Can it work against me?

sarah Leo answered.
3 years ago

Business and trading are all about heeding the warning signals. You never get the warning signals on time. Successful trading is all about heeding the warning signals and unless you are able to crystallize and define these warning signals, you are not likely to be able to handle these risks.

There are two aspects to business as in trading; profits and quality. In fact, businesses are sustainable over the long term when their focus on profitability is matched by quality of product of service. The same applies to business too. When your quality of trading decisions is combined with a profit obsession, which is when you’re trading activity generates the real alpha.

Trading, like your business, also requires corrective action at times. You find it hard to take corrective action. Business is all about having a Plan-B for every activity. You don’t ever get yourself into a cul-de-sac in business. The same applies to trading too. For every trading position, you must have a clear cut Plan-B in place. Otherwise you are likely to find yourself in a spot.

Any successful business is about creating a continuous learning process. Even in trading, unless you imbibe this continuous learning process and apply it to your trading, your quality of trading is unlikely to improve.

Both trading and business are a bottom-up approach. You need to understand the end customer or the market and then create strategy backwards. The basic logic of business is to actually understand the market and play your best cards at the right time. The same applies to trading too. If you don’t treat your trading activity like a business, then you are likely to focus more on competing with other traders rather than identifying opportunities in the market. That can cost you in the long run.